HARRISONBURG, Va. -- According to the Virginia State Corporation Commission, car title lenders are handing out more loans.
They gave out more than 150,000 loans worth about $180 million in total.
In 2012, 80% of more than 13,000 vehicles that were repossessed were sold by vendors after people couldn't pay those loans back.
Vice President of Commercial Lending at First Bank and Trust company said this is not a traditional form of financing.
Rea said it's not something that bank lenders do because when someone brings in a car title, they base the loan off the value of the car.
They do that instead of getting to know the person, checking their credit score and seeing if they can pay the loan back.
Rea said the quick loan companies charge a higher interest rates and fees.
Rea said borrowing money and using something you already own as collateral is risky.
"I never want to paint with a broad stroke but you just [have to] be very careful putting up something like a vehicle that's already paid for because the odds of you being able to get a good rate, good deal to pay that back are very tough. And you know you got to really weigh what the need is versus the risk you're taking as a borrower," said Rea.
If you're going to purchase a car, Rea said to make sure you get to know the loan officer, whether it's through a dealer or a traditional bank.
Interest rates are different for car title loans.
Most credit cards these days, according to Rea, have rates anywhere from 18 to 24 percent.
Interest rates for title loans can be 100 to 300% APR, which is a lot higher.
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